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When you buy shares in a company, there is always a risk that the price drops to zero. But if you pick the right stock, you can make a lot more than 100%. For example, the DAVIDsTEA Inc. (NASDAQ:DTEA) share price has soared 221% in the last 1 year. Most would be very happy with that, especially in just one year! And in the last month, the share price has gained 28%. It is also impressive that the stock is up 57% over three years, adding to the sense that it is a real winner.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the last year DAVIDsTEA grew its earnings per share, moving from a loss to a profit.
We think the growth looks very prospective, so we're not surprised the market liked it too. Generally speaking the profitability inflection point is a great time to research a company closely, lest you miss an opportunity to profit.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into DAVIDsTEA's key metrics by checking this interactive graph of DAVIDsTEA's earnings, revenue and cash flow.
A Different Perspective
It's nice to see that DAVIDsTEA shareholders have received a total shareholder return of 221% over the last year. There's no doubt those recent returns are much better than the TSR loss of 11% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand DAVIDsTEA better, we need to consider many other factors. To that end, you should be aware of the 3 warning signs we've spotted with DAVIDsTEA .
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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